Rules of Investing - That I learned Today
Finance companies are the biggest cash cows of the world.
Example banks - in simple format the business model is - their profit comes from the difference b/w the interest rate they give to depositors and the interest rate that they charge the borrows - cost of operating the business.
Four Principles:
1) Find an undervalued company - sort the book value (asset value) to the price (of stock) ratio of companies - lesser than 1 is undervalued. That means if we break the company apart today and sell it in pieces, the shareholders will be more profitable.
2) Find the reasons of why the company was undervalued - study it's balance sheet, IR, SEC Filings, SEC Reporting of past events. Summarize the problems that are faced by the given company (in comparison) to other companies in the industry.
3) Find the reasons why if the company is on track to solve those problems that are holding it back: track their investor relations quarterly roll out.
4) Find out if the top management is trust worthy: are they renowned in the industry? The point is they should not be fraudsters. They should be working in the best interest of the company.
Side Note: Investors should be
Example banks - in simple format the business model is - their profit comes from the difference b/w the interest rate they give to depositors and the interest rate that they charge the borrows - cost of operating the business.
Four Principles:
1) Find an undervalued company - sort the book value (asset value) to the price (of stock) ratio of companies - lesser than 1 is undervalued. That means if we break the company apart today and sell it in pieces, the shareholders will be more profitable.
2) Find the reasons of why the company was undervalued - study it's balance sheet, IR, SEC Filings, SEC Reporting of past events. Summarize the problems that are faced by the given company (in comparison) to other companies in the industry.
3) Find the reasons why if the company is on track to solve those problems that are holding it back: track their investor relations quarterly roll out.
4) Find out if the top management is trust worthy: are they renowned in the industry? The point is they should not be fraudsters. They should be working in the best interest of the company.
Side Note: Investors should be